This website uses information gathering tools such as cookies and other similar technologies. By clicking 'Accept' on this banner or by using this website, you consent to the use of cookies unless you have disabled them. If you do not consent, do not use this website. It is at your, the user's, discretion to proceed with accessing this website. For more information, read the "Cookie Policy" under Online Privacy Policy.This website uses cookies..

This website uses information gathering tools such as cookies and other similar technologies. By clicking 'Accept' on this banner or by using this website, you consent to the use of cookies unless you have disabled them. If you do not consent, do not use this website. It is at your, the user's, discretion to proceed with accessing this website. For more information, read the "Cookie Policy" under Online Privacy Policy.

Accept

This website uses information gathering tools such as cookies and other similar technologies. By clicking 'Accept' on this banner or by using this website, you consent to the use of cookies unless you have disabled them. If you do not consent, do not use this website. It is at your, the user's, discretion to proceed with accessing this website. For more information, read the "Cookie Policy" under Online Privacy Policy.This website uses cookies..

This website uses information gathering tools such as cookies and other similar technologies. By clicking 'Accept' on this banner or by using this website, you consent to the use of cookies unless you have disabled them. If you do not consent, do not use this website. It is at your, the user's, discretion to proceed with accessing this website. For more information, read the "Cookie Policy" under Online Privacy Policy.

Indraprastha Gas Ltd Management Discussions.

Company Overview

Indraprastha Gas Limited (Company) is a joint venture promoted by GAIL (India) Limited
and Bharat Petroleum Corporation Limited (BPCL). Government of NCT of Delhi is also a
stakeholder with 5% equity. The Company is in City Gas Distribution (CGD) business
supplying natural gas to transport, domestic, commercial and industrial consumers. The
operations of IGL is spread over NCT of Delhi, Noida,

Greater Noida, Ghaziabad, Gurugram, Meerut (except area already authorised), Shamli,
Muzaffarnagar, Karnal and Rewari. The Company has received authorisation from PNGRB to set
up CGD network in the geographical areas of Kanpur (except areas already authorized),
Hamirpur & Fatehpur districts, Kaithal district and Ajmer, Pali & Rajsamand
districts.

The Company has two associates which also operates as CGD Companies. Central UP Gas
Limited (CUGL), caters to the cities of Kanpur, Bareilly, Unnao and Jhansi in Uttar
Pradesh and Maharashtra Natural Gas Limited (MNGL), caters to the city of Pune and nearby
areas of Pimpri, Chinchwad, Chakan, Talegaon and Hinjewadi in the State of Maharashtra.

With a modest beginning in the year 1998, the Company has become a leading CGD Company
of the country today.

Indian Natural Gas Scenario

India is one of the largest natural gas consumer in the world and also one of the
fastest growing energy consumer. However, share of natural gas constitutes around 6% in
the country primary energy mix as against 24% in the world.

Government has been taking various steps to increase share of natural gas in primary
energy mix to 15% in the coming years. In this regard, thrust has been given to increase
domestic gas production, encourage import of Liquified Natural Gas (LNG) and augment LNG
import capacity, completion of national gas grid, faster roll out of city gas distribution
network across the country, etc.

The domestic natural gas net production showed a growth of 1.02% from 31,731 mmscm in
FY2017-18 to 32,056 mmscm in FY2018-19. Total import of LNG during FY 2018-19 increased by
4.56% to 28692 mmscm from 27,439 mmscm in the previous year. The share of import of LNG
has been showing an upward trend over the years and constitutes almost half of the total
consumption of gas in the country.

The major sectors that contribute towards growth of natural gas are power, fertilizers,
steel, petrochemical and CGD industry.

Natural gas industry in India is likely to grow faster in the coming years due to push
given by government to make India, a gas based economy.

City Gas Distribution Sector in India

City Gas Distribution (CGD) is emerging as one of the fastest growing sector in India.
Government of India has given thrust to this sector by pushing expansion of CGD network
across the country. The financial year 2018-19 laid the strong foundation for future
expansion of CGD sector. During this year, PNGRB invited bids in its 9th & 10th round
for setting up CGD network in various parts of the country. In 10th round of bidding,
PNGRB covered 50 geographical areas spread over in 14 states and 124 districts. It would
increase coverage of CGD cumulatively to 70% of the countrys total population and 50% of
countrys area.

The total investment for setting up CGD networks under 9th and 10th bidding rounds is
expected to be more than Rs. 1,00,000 Crores in the next 8 years. These CGD bidding rounds
will create employment generation potential for around 3 lacs person in skilled,
semi-skilled and non-skilled category.

The government has also planned to connect 1 Crore households with PNG supply for
cooking purpose by 2020.

In order to give boost to the CGD sector, the government has taken many steps such as:

i. Meeting the entire requirement of gas for transport and PNG domestic households of
CGD companies in the country. ii. According the status of public utility to CGD sector.
iii. Issuing guidelines for allowing the development of PNG network into defence
establishment across the country. iv. Advising state governments to standardise the road
restoration/permission charges and keeping provisions of land for CNG stations in their
master plans.

The widespread coverage of CGD network across the country and government initiative to
boost this sector would bring a number of opportunities for CGD companies in the country.

Your Company being a leading and premier CGD Company in the market is fully geared to
leverage its execution capabilities and expertise for future growth.

Performance Analysis i. Financial Performance

IGL witnessed the following financial growth on standalone basis during the year under
review:

 Earnings per share of the Company showed a growth rate of 17.33% from Rs. 9.58
in FY 2017-18 to Rs. 11.24 in FY 2018-19.

 Net worth of the Company as at 31st March 2019 was Rs. 4129.85 Crores as
compared to Rs. 3512.9 Crores as at 31st March 2018.

 As on 31st March 2019, IGL is a zero debt Company.

ii. Ratio Analysis

S. Particulars

For the Year 31 March 2019

For the Year 31 March 2018

1. Debtors Turnover Ratio

25.65

21.39

2. Inventory Turnover Ratio

992.31

847.78

3. Current Ratio

1.46

1.52

4. Operating Profit Margin %

18.36%

20.34%

5. Net Profit Margin %

13.71%

14.67%

6. Return on Net Worth %

19.05%

19.09%

iii. Segment Wise Performance

The Company has its presence in following segments:

 Compressed Natural Gas (CNG) - IGLs majority portion of the revenue accrues
from sales of CNG amounting to Rs. 4761 Crores in FY 2018-19, accelerating at growth rate
of 24% over previous year. The Company has 500 stations through which it provided gas to
10.7 lakh vehicles, with an average sale of 31.34 lakh kg per day in 2018-19.

 Piped Natural Gas (PNG) - The total sales of PNG grew by 35% to Rs. 1576 Crores
in FY2018-19 from Rs. 1165 Crores in FY 2017-18. Sales volume of PNG increased from 479
mmscm in previous year to 553 mmscm in FY 2018-19, registering a growth rate of 15.45%.
IGL provided 2.10 lacs new PNG connections during FY 2018-19. As on March 31, 2019, total
PNG connections were provided to 11.02 Lakh households and 4276 Commercial &
Industrial consumers. The Companys pipeline infrastructure expanded from 11,673 kms in FY
2017-18 to 13,028 kms in FY 2018-19.

Segment-Wise Sales Volume

The growth momentum of sales is likely to continue in the coming years.

Expansion in new geographical areas: The Company has spread its wings in number of
new geographical areas after 9th and 10th round of bidding. The Company would continue to
look for expansion in new geographical areas in the coming years. Green corridors:
Opening of CNG/LNG stations along highways would provide opportunities to the Company to
increase its CNG sales volumes.

Merger/acquisition of stake in other CGD Companies: The

Company is also exploring the possibility of expanding its operations through merger or
acquisition of shares in other CGD Companies in the country.

Cost competitiveness: CNG is economical as compared to other liquid fossil fuels
such as petrol/diesel. This would continue to push the conversion of vehicles to CNG mode.

Thrust on PNG by Government: Government has envisaged to provide 1 Crore
connections by 2020 and has set aggressive targets for providing PNG connections. In line
of the same, your Company has also set high targets for PNG domestic connections.

Smart Cities: The government of India is in the process of developing smart cities.
These cities will have a strong infrastructure of clean and efficient fuel which would add
to the growth prospects of the Company. Concern for pollution: There is a concern
for increased population in the country. In order to curb the same, judiciary, central and
state governments are giving boost to eco-friendly fuel i.e. CNG and PNG.

Threats, Risk & Concerns and Mitigations

Growing importance to electric vehicles: The popularity of Electric enabled
vehicles have been growing in India with government introducing various incentive schemes.
In medium to long term, these cars may pose a potential threat to CNG run vehicles.

The Company is preparing itself for meeting the challenge by becoming a part of value
chain in electric car business. It has entered into a MoU with a reputed Company for
putting up charging facilities at its stations. Regulatory Regime: The City Gas
Distribution is under regulatory regime wherein the Regulatory Board (PNGRB) has framed
various regulations, which have ramifications on day to day business operations of the CGD
entity. The changes in the regulations, inter-alia, marketing exclusivity may have an
adverse impact on the Company. With regard to

Marketing Exclusivity, IGL has challenged Regulations 5 and 6 of the PNGRB Exclusivity
Regulations in the Honble High

Court of Delhi and the matter is sub-judice.

Your Company has already established the CGD infrastructure across all parts of NCT of
Delhi. The setting up of new CGD infrastructure would be a major challenge for any new
entrant in the prevailing scenario.

Non-availability of Natural Gas: Domestic Natural Gas is a scarce resource. The
non-allocation of the required amount of low cost natural gas by government may have an
adverse impact on margins.

However, considering the thrust of the government for promoting eco-friendly fuel and
firm allocation of gas for transport and PNG domestic segments, it is expected that the
Company would continue to get assured supply of gas at an affordable price.

Competition from Alternate Fuels: The Companys customers also have an alternative
to move towards other fuels if there is a cost advantage. If such a scenario arises then
it would impact Companys business.

CNG constitutes around 75% of the total sales volume of the Company and is very much
competitive compared to alternate fuels i.e. petrol and diesel.

Macro-economic scenario: The changing macro-economic scenario can have an impact on
the growth plan of the Company.

However, the Company has a strong financial position and credit rating which will help
the Company to mitigate this risk. Healthy profitability, strong cash flow from
operations, zero debt, and comfortable working capital position helps the Company to
maintain its financial position.

Fire & Safety Risk- The Company is in gas distribution business and fire &
safety is a major concern.

The Company gives utmost priority to this area and has robust system and procedures
which helped it to record 161 million accident free man hours as on March 31, 2019.

Internal Control

The Company has adequate internal control procedures commensurate with the size and
nature of its business. During the FY 2018-19, M/s PriceWaterhouse, Chartered Accountants
and in-house audit team carried out internal audits and the internal audit reports
prepared by them were placed before the Audit Committee.

Human Capital

The Company values its employees the most as their hard work and efforts lead to
Companys growth. IGL provides training at all levels to its employees. As on March 31,
2019, IGLs employee strength stands at 644 employees. With the growth of the Company, the
employee strength is anticipated to grow further. The Company undertakes various
initiatives to integrate employees personal goals with Companys goals.

Environmental consciousness

Natural gas is an environment friendly fuel and emerging as a fuel for the future.
There is an endeavour on part of the government to increase its share in the total energy
basket of the country. The Company is making continuous efforts to promote its wider use
among all categories of prospective customers. To ensure this, awareness is spread among
all the users regarding the economical and environmental advantages of natural gas when
compared to other fuels. The Company is promoting usage of natural gas as a fuel to reduce
pollution in Delhi and its adjoining areas.

Cautionary statement

The Statement in this Management Discussion and Analysis Report describing the
Companys objectives, projections, estimates, expectations or predictions may be
forward looking statements within the meaning of applicable laws and regulations.
Actual results might differ substantially or materially from those expressed or implied.
Important developments that could affect the Companys operations include demand-supply
conditions, changes in government and international regulations, tax regimes, economic
developments within and outside India and other factors such as litigation and labour
relations.

"Prevent Unauthorized Transactions in your demat / trading account Update your Mobile Number/ email Id with your stock broker / Depository Participant. Receive information of your transactions directly from Exchanges on your mobile / email at the end of day and alerts on your registered mobile for all debits and other important transactions in your demat account directly from NSDL/ CDSL on the same day." - Issued in the interest of investors." | "KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary." | "No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."

www.indiainfoline.com is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.

You are not allowed to download same report on single day

Terms & Conditions

By clicking on submit button, you authorize IIFL & its representatives & agents to provide information about various products, offers and services provided by IIFL through any mode including telephone calls, SMS, letters etc. . you confirm that laws in relation to unsolicited communication referred in National Do Not Call Registry as laid down by Telecom Regulatory Authority of India will not be applicable for such information/ communication.